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              -                   Program Letter 2014-03              

 

PL 14-03
 

**Please distribute this notice to all individuals within your organization who may need the information in connection with their work.**

The Office of General Counsel (OGC) of the Railroad Retirement Board (RRB) issued legal opinion L-2014-2 on January 13, 2014, which reinterprets the definition of a private pension under section 216.42 of RRB regulations to exclude 401(k) plans.  Therefore, effective immediately, a supplemental annuity will no longer be reduced if an employee receives a distribution from a 401(k) plan. Under section 2(h)(2) of the Railroad Retirement Act (RRA), a supplemental annuity is reduced by the amount of a private railroad pension the employee receives that is attributable to the employer's contributions.  Section 216.42 of RRB regulations defines a private railroad pension as follows:
                      - What is a private railroad pension ...A private pension is a plan that: (1) is a written plan or arrangement which is communicated to the employees to whom it applies; (2) is established and maintained by an employer for a defined group of employees; and (3) provides for the payment of definitely determinable benefits to employees over a period of years, after retirement or disability.  Such a plan is commonly referred to as a defined benefit plan.
                      - Defined contribution plan . A plan under which the employer is obligated to make fixed contributions to the plan regardless of profits (sometimes known as a money purchase plan) is a private pension plan. A plan under which the employer's contributions are discretionary is not a private pension plan under this section.

Although under some 401(k) plans the employer is obligated to make fixed contributions to the employee's account, a 401(k) plan does not provide for the payment of definitely determinable benefits to employees over a period of years. For this reason, the OGC has determined that a 401(k) plan does not qualify as a private pension plan under section 216.42 of the RRB regulations. The RRB uses Form G-88p, *Employer's Supplemental Pension Report*, to obtain an employee's pension information from the railroad employer. Both RRB field offices and Operations examiners have been instructed to no longer release Form G-88p to the railroad employer if the employee states they are covered only under a 401(k) plan. However, the form will continue to be released, as before, in the following situations:
                      - "Conflict" cases. A conflict exists when the employee states that they were not covered under a private pension plan with the employer, or were covered only under a 401(k) plan, and based on the latest pension information the RRB has in file, the job category in which the employee worked was covered under the employer's pension plan.  	 
                      - The employee states they were covered under a private pension plan, but their monthly pension benefit amount is less than $43.
                      - The employee states they were required to receive their entire pension account in a lump sum payment due to the pension plan's small benefit provision.

Both Form G-88p and the Employer Reporting Instructions will be revised to reflect the changes outlined in Legal Opinion L-2014-2. In the interim, please follow these instructions if you receive Form G-88p for a former employee.  
                      - If the employee was not covered under a private pension and only under a 401(k) plan sponsored by your organization, select "No" in Item 8 and enter "401(k) Only" in the remarks section. No additional information is necessary.
                      - Sign and date the form.
                      - Return the form to the address shown.

If you have any questions regarding the reduction to supplemental annuities for 401(k) distributions, please contact the Quality Reporting Service Center at QRSC@rrb.gov or the telephone number shown above.

 

(312) 751-4992QRSC@rrb.gov(312) 751-7123

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								Last updated: 06/06/2017